Categories

The Week in VIX - 2/9 - 2/13

The S&P 500 finished Friday at a 2015 closing high while VIX finished the day at the lowest closing price for 2015. What is a little perplexing about the chart below is the relationship between spot VIX and the February contract. I am well aware that VIX is under a slight amount of extra pressure due to the three day holiday, but all day Friday the February VIX future was much greater than the 1.00 point premium to the underlying index. I understand the world has been full of surprises and there is a bit of extra risk associated with short market volatility. We shall see by Wednesday on the open if the premium was just justified or not.

At least one trader seems to think February VIX settlement will come in closer to where the index was Friday than where the February futures closed. The last block trade on Friday was a buyer of almost 5,000 VIX Feb 15 Puts for 0.17. Note on the payoff diagram below that if February VIX settlement comes in where VIX closed Friday this trade will actually turn out to be a winner. For illustration purposes I also show where the February VIX futures closed Friday.

Other Cboe Sites

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (ODD). Copies of the ODD are available from your broker or from The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606. The information on this website is provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions which should be referred to for additional detail and are subject to changes that may not be reflected in the website information. No statement within the website should be construed as a recommendation to buy or sell a security or to provide investment advice. The inclusion of non-Cboe advertisements on the website should not be construed as an endorsement or an indication of the value of any product, service, or website. The Terms and Conditions govern use of this website and use of this website will be deemed acceptance of those Terms and Conditions.